Marvell Loses Plea to Cut $1.17B Damage - Analyst Blog

Shares of semiconductor chipmaker Marvell Technology Group Ltd. ( MRVL ) were down 1.8% after the U.S. District Judge Nora Barry Fischer rejected the company's plea to reduce the $1.17 billion damage for infringing two patented technologies of Carnegie Mellon University (CMU) by $620 million.

In 2012, Marvell was found guilty of infringing two patented technologies of CMU and was asked to pay a penalty of $1.17 billion as damages. The patented technologies of CMU have helped Marvell deliver high performing chips to accurately read data from high speed magnetic disks.

Carnegie Mellon sued Marvell in Mar 2009, alleging that the semiconductor chipmaker "consciously copied" its patents, which helped it sell billions of chips. Reportedly, Marvell earned a hefty $10.34 billion as revenues and $5.05 billion as operating profit leveraging the technology.

Marvell will proceed with the case at the U.S. Court of Appeals for the Federal Circuit. However, the impending decision on a further increase in damages would weigh on the company's near-term results. Moreover, if the company is asked to pay the entire amount in a single transaction, it will unfavorably impact its balance sheet as well.

Marvell had a cash balance of $1.80 billion at the end of the third-quarter of fiscal 2014 compared to $1.73 billion in the previous quarter. The company generated $177.2 million cash from operating activities while free cash flow was $157.0 million.

We remain positive on Marvell's diverse revenue model and stable balance sheet. However, competition in the semiconductor market from players such as Intel Corp. ( INTC ) and LSI Corp. ( LSI ), sluggish macroeconomic conditions, higher material costs and the company's European exposure are the near-term headwinds.

Currently, Marvell has a Zacks Rank #2 (Buy). Western Digital Corp. ( WDC ) is a better-ranked stock in the technology sector with a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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